I last looked at the technology companyCohort(LSE: CHRT)in July 2018 when it released its full-year results report. Back then I was impressed by the firms record of raising its dividend annually and owned up to being tempted to add the stock to my long-term retirement portfolio.
A touch of Warren Buffetts philosophy
The firms strategy revolves around the theory that small and medium-sized enterprises (SMEs) can flourish within the umbrella of a larger organisation. Theres a touch of Warren Buffetts philosophy in that approach, in my view. Buffett is known for giving the businesses within his Berkshire Hathawayconglomerate a great deal of autonomy. He hires good managers and lets them get on with it. As long as the cash keeps rolling in, and the enterprises remain prosperous and ethical in their dealings, hes happy.
Cohort owns five businesses: Chess Technologiesoffers systems for detecting, tracking, classifying and disrupting naval, land and air threats; EIDmakes advanced communications systems for the defence and security markets;MASS focuses on electronic warfare, information systems and cybersecurity; MCLdesigns and integrates communications and surveillance technology, and offers support and training for UK end-users including the Ministry of Defence (MOD) and other government agencies; and SEAis an electronic systems and software house operating in the defence, transport and offshore energy markets.
The directors insist that each business has high growth potential. But last year, Cohort said strongpressures on public expenditure in the UK andin many other marketswere keeping demand for the firms services suppressed. Nevertheless, the outlook statement was upbeat with the directors saying that there was a concentration of opportunities for the year ahead that was larger than normal.
A decent outcome and a positive outlook
So here we are a year later and its interesting to see how trading actually panned out for the company over the 12-month period to 30 April. Todays full-year report reveals to us that revenue rose 10% compared to the year before, adjusted earnings per share shot up 16%, and the order book grew 84% to almost 190m. Cohort has been trading well, helped by a better-than-expected contribution from its December 2018 acquisition of a majority stake in Chess Technologies.
The directors slapped 11% on the total dividend for the year, signalling a decent outcome against last years expectations. Indeed, the company won allthe large order opportunities it pitched for, both renewals and new.It seems to me that Cohort is good at delivering surprises to the upside for shareholders, and in one reassuring measure, it has managed to increase the dividend every year since it arrived on the stock market in 2006.
Cohort also announced today the winning of a 4.79m contract to supply services for Electronic Warfare Operation Support (EWOS) to an export customer. Operational progress continues at pace, and there is plenty of reason to expect the strongorder book and pipeline of order prospects to deliver further gains in the year ahead.
At 430p, the share price is just over 20% higher than it was around this time last year, which throws up a forward-looking earnings multiple a little below 12 for the current trading year and an anticipated dividend yield around 2.4%. To me, the stock remains attractive.
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